Correlation Between Walker Dunlop and Deutsche Small

Can any of the company-specific risk be diversified away by investing in both Walker Dunlop and Deutsche Small at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Walker Dunlop and Deutsche Small into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Walker Dunlop and Deutsche Small Cap, you can compare the effects of market volatilities on Walker Dunlop and Deutsche Small and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Walker Dunlop with a short position of Deutsche Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walker Dunlop and Deutsche Small.

Diversification Opportunities for Walker Dunlop and Deutsche Small

-0.26

Correlation Coefficient

Walker Dunlop  Deutsche Small

Very good diversification

The 3 months correlation between Walker and Deutsche is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Walker Dunlop and Deutsche Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Small Cap and Walker Dunlop is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Walker Dunlop are associated (or correlated) with Deutsche Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Small Cap has no effect on the direction of Walker Dunlop i.e., Walker Dunlop and Deutsche Small go up and down completely randomly.

Pair Corralation between Walker Dunlop and Deutsche Small

Allowing for the 90-day total investment horizon Walker Dunlop is expected to generate 2.12 times more return on investment than Deutsche Small. However, Walker Dunlop is 2.12 times more volatile than Deutsche Small Cap. It trades about 0.03 of its potential returns per unit of risk. Deutsche Small Cap is currently generating about 0.04 per unit of risk. If you would invest  8,394  in Walker Dunlop on January 24, 2024 and sell it today you would earn a total of  1,001  from holding Walker Dunlop or generate 11.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.17%
Values	Daily Returns

Walker Dunlop  vs.  Deutsche Small Cap

Walker Dunlop

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Walker Dunlop has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Walker Dunlop is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Deutsche Small Cap

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Deutsche Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly weak technical and fundamental indicators, Deutsche Small may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Walker Dunlop and Deutsche Small

The main advantage of trading using opposite Walker Dunlop and Deutsche Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walker Dunlop position performs unexpectedly, Deutsche Small can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Deutsche Small will offset losses from the drop in Deutsche Small's long position.

The idea behind Walker Dunlop and Deutsche Small Cap pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.